Law Firm Mergers: Two Blinding Glimpses of the Obvious

The Wall Street Journal carried a column on November 11, 2013, “Big Law Mergers Questioned," that contained two blinding glimpses of the obvious – one explicit, one implicit. The explicit one was straightforward, yet seemed to elude the understanding of the writer: that in pursuing mergers to create ever-bigger organizations, law firms are simply following the paths of their clients. We saw this in the 1930s and 1940s and later when unions became larger in order to do battle with management. Today law firms are combining in order to be more respected, better received, and perceived as players in the corporate world. Small law firms supposedly can’t play in the same ballpark as a very large customer (corporate America).

Does merging law firms to make them bigger actually make them better? The answer is “yes” only when the parties have thought through what they want to accomplish and what synergies exist between them. One has to be old enough to recall that corporate America once thought that “bigger was better” when viewing itself. Then these conglomerates seemed to collapse of their own weight. The phrase, “getting back to core competencies,” became the watchword and large enterprises began breaking up into smaller units.

That’s where we get the second “blinding glimpse” – the smallest unit in a law firm is the lawyer. And corporate client after corporate client in the Journal article said that the individual lawyer is most important to them. “We hire lawyers, not law firms,” the GC of Hewlett Packard said flatly. There is some disagreement over this assertion.

Theoretically teams institutionalize the work done for a given client as they involve other firm lawyers in the delivery of legal services, even if one lawyer remains the client’s primary contact. But in a megafirm of thousands of lawyers, team members are interchangeable.

When you have a problem with your car, do you contact GM or Toyota headquarters, or the friendly mechanic at your neighborhood garage? Even neighborhood garages grow, but their size is infinitesimal compared to GM or Toyota. There is a limit to "bigger is better" beyond which "core competencies" begin to falter. Firms are kidding themselves if they think bigger by itself makes them better. And clients, often wanting to be close to the center of the law firm, will still engage a smaller, but yet large (regional) law firm.